NRF Survey: Value-added tax would force spending cutbacks

Related Content

Washington, D.C. A survey released Thursday by the National Retail Federation found that most Americans feel a value-added tax (VAT) would reduce their spending.

According to the NRF/BIGresearch survey, 64% said a federal VAT of any amount would impact their spending on everything from cars to homes, groceries and medicines.

If the government imposed a VAT of 15% and applied it to all purchases, 92% said their spending would be affected.

Some policymakers are proposing a new consumption tax as a way to reduce the federal deficit.

“These numbers are clear evidence of what common sense would tell even the most casual observer: if you tax spending at a time when the economy is still struggling to recover, consumers are going to spend less,” NRF president and CEO Matthew Shay said. “With consumer spending representing two-thirds of the economy, a consumption tax -- by VAT or any other name -- is not the path to recovery or a prudent way to address the federal deficit. The deficit needs to be reduced, but a VAT is not the answer.”

According to the survey, areas where consumers would cut back the most if a “federal sales tax” or VAT were created would include eating out (83%), clothing or accessories (80%), food/groceries (74%), entertainment (72%) and vacation travel (72%).

Additionally, half said a VAT would influence their spending on a home while two-thirds said it would impact automobile purchases.

Fifty-nine percent of consumers said they would even cut back on prescription and over-the-counter medicine.

Instead of creating a new tax, 82% of those surveyed believe that Congress should reduce the federal deficit by spending less. Only 10% of respondents favored creation of a VAT or other form of federal sales tax to reduce the deficit, and just 8% favored an income tax increase.

Anumber of prominent members of Congress and policymakers have said in recent months that a VAT should at least be considered as a way to reduce the federal deficit, which is currently at its highest share of GDP since World War II. President Obama told his deficit reduction commission in April that nothing -- including a VAT -- should be considered off the table.